First-quarter Performance Continues Good News At Air Products, Donley Says

January 24, 1986|by TOM MOYLAN, The Morning Call

Air Products and Chemicals Inc. of Trexlertown yesterday reported first- quarter sales and earnings which Chairman and Chief Executive Officer Edward Donley said were an echo of results for the 1985 fiscal year.

Speaking at the company's annual stockholders' meeting yesterday at Cedar Crest College, Donley reported that first-quarter sales of $475.8 million were up 9 percent from the same period last year. The company had a net income of $34.4 million, up 7 percent from a year earlier, and earnings per share were up 11 percent to $1.17.

The per-share earnings are based on 29.4 million outstanding shares of common stock, 1.2 million fewer than in the previous first quarter because of the company's stock repurchase program.

Donley, who yesterday reconfirmed that he will retire when he turns 65 in November, said the first-quarter performance was "a result of solid performances by our industrial gases and chemicals business."

He said industrial gases, the company's profit bulwark, benefited from a modest volume and margin gains in the United States. He said small gains in reported results were realized from foreign operations because of the decline in the value of the U.S. dollar against foreign currencies.

Sales of chemicals advanced slightly compared to 1985, Donley said. Shipments of urethane chemicals and the polyvinyl chloride (PVC) business improved, Donley said. The gains were partially offset, however, by a weak market for agricultural chemicals.

Donley said that despite continuing cost containment steps in the company's engineering services, that segment posted a first-quarter loss. The chairman said workloads are expected to decline in 1986 because current projects are "stretched out and fewer new orders are received."

First-quarter results for the equipment and technology segment also were lower than last year, Donley said. "This segment will improve substantially during the year as work is carried out on orders that are in hand," Donely added, and results should be more favorable in the second quarter.

Including 1985 results, Donley said, the company "is strong and growing as we enter 1986."

He noted the company set a sales record of $1.8 billion last year, with earnings of $143.5 million. Earnings per share rose 20 cents to $4.75 a share, and the quarterly dividend was increased 7 cents to 37 cents per share.

Donley said the industrial gas business performed superbly last year and the chemicals segment performed relatively well.

Engineering services broke even in 1985 and equipment and technology posted a loss. Donley said the company expects engineering to slacken further this year but cost-reduction efforts are under way.

Equipment and technology were hurt by a weak market for some lines, by one-time costs of consolidating equipment to lower break-even points and by increases in costs for new technology development and business initiatives. Donley said 1986 "promises to be much better" for this segment.

Noting the company's mandatory retirement policy, Donley said the age limit is "an excellent policy (because) it opens up opportunity for young people coming along, and it makes clear to the world inside the company and outside the company what the future development of the company is and the time schedule on which it's going to occur."

Donley assured the stockholders that although the board of directors will not act on appointing his successor until later this year, "the management capability of the company is deep and broad in administration, in technology, in manufacturing and marketing and all of these skills necessary to continue to operate successfully a complex, vital organization such as that that Air Products is today."

He added that "there is absolutely no question whatsoever that the management in place in this company will move forward without ever missing a step and will produce for all of us who are in- volved a beneficial and a constructive and a growing and a prosperous future."

Donley said he that after retirement he will devote his time to being chairman of the U.S. Chamber of Commerce and the Business Higher Education Forum.

Answering a question from the floor, Donley said that the directors may consider splitting the company stock this year.

Air Products common stock hit an all-time high last week of 68 a share. Donley said investment banking experts have told the company that the "ideal trading range for the stock price is in the $30 to $40 range."

He said that "anybody who believes in that principle, and I think it's widely accepted in the investment community, would think that we are a candidate for a stock split."

He added that the board has not dealt with the issue of a stock split and has no plans to but will do so "if at that time it is appropriate."

In other remarks, Donley criticized the recently passed House tax-reform bill, saying it would raise the already high cost of capital in the United States and "would inevitably reduce jobs here at home and increase them overseas."